Here's an example: you can open an ETH long position worth 1000 USDT backed by a margin of 100 USDT. Your starting margin ratio is 10%, equivalent to a leverage of 10x. If ETH falls in value, you start to lose money, resulting in a negative PnL. PnL is added to your margin, so in our example, your margin will start to go below 100 USDC, in turn decreasing your margin ratio. If the margin ratio falls to 1%, then your position will be liquidated.